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Ofcom’s fibre margin squeeze test’s initial indicative assessment concludes that BT’s current wholesale/retail pricing is ‘close to the boundary’ of creating a squeeze on its competitors

While BT can take comfort that it is at least close to passing the test, its DSL competitors (Sky, TalkTalk et al) can take comfort that BT cannot make life materially more difficult for them without failing it

Crucially, the costs of BT Sport are included in the test, so BT is now heavily dis-incentivised from further aggressive bids for sports rights, which is positive news for the prospective cashflows of both Sky and indeed BT itself

National newspaper advertising fell 8% last year (and by 28% since 2007), but we believe a stronger economic outlook will slow the decline in 2014 to about 6%, even if volatility month-to-month makes budgeting and management a relentless challenge.

The local and regional press should also experience some—but smaller—reprieve, though the sector will continue to haemorrhage national display advertising, so the sector focus must return to local enterprises.

Digital advertising has reached meaningful scale at some titles, but growth in online display is slowing. Platform sales are growing quickly and are essential to resist the devaluing of context for digital marketing in content media.

Market revenue growth in the UK residential communications sector was surprisingly robust in Q1 2014, rising a touch to over 5% (or around 4% excluding the direct impact of BT Sport) from just under 5% the previous quarter, despite facing a number of headwinds

Revenue growth at the top four operators has converged to around 4% for all, which marks a major long term turnaround for BT and TalkTalk, who back in 2012 were both experiencing firmly declining revenue well below market growth, and have since done much to stabilise their subscriber bases and sustain ARPU growth

Looking forward, we expect that BT will continue to do well in the June quarter given Sky’s continued focus on TV products, but thereafter its focus may change, and whether BT's recent competitive boost from fibre will continue growing is uncertain. Having said this, any likely market share shifts are relatively minor in the context of the market, with the general theme likely to remain that the rising tide is lifting all boats

Strong growth in the UK economy has created a very positive short term outlook for display advertising, with TV Net Advertising Revenues (NAR) expected to increase by 5% in 2014.

That bright prospect is nonetheless overshadowed by online video advertising, where 2014 is expected to add almost £200 million to the estimated £300 million spent in 2013. YouTube is leading the way, but the TV broadcasters also stand to benefit.

All the indicators point to yet more rapid growth in online video advertising over the next three to five years. So far it has had little apparent impact on TV NAR, but this should change from 2015 as TV and online video become more closely meshed.

The latest vision of Sky Europe under discussion between 21st Century Fox and BSkyB has 21st Century Fox maintaining its share in BSkyB at 39%, while BSkyB buys out 21st Century Fox’s interests in Sky Deutschland and Sky Italia

Agreeing the right price will be complicated by the contrasting fortunes of Sky Deutschland, which is enjoying a sustainable boom, and Sky Italia, which, although well run, is holding on to marginal profits in Europe’s most inflated football rights market and in a structurally stagnant and weak economic climate

Today, there appear only modest operating efficiencies to be gained from bonding the three Skys into Sky Europe; however, centralised content and service strategies may become much more important in coming years in an increasingly scale-driven European marketplace

Vodafone Europe’s service revenue growth improved by 1.1ppts to -8.5% in the March quarter, but this was all driven by a waning regulatory impact, with underlying growth nudging down slightly

The company’s service revenue growth improved a fraction more than its competitors, but it has barely narrowed the substantial gap, and contract net adds share fell after three consecutive quarters of improvement

Hopes for a recovery in underlying growth still centre on M&A, with EC decisions due in June, and on the Project Spring investment paying off, but this is unlikely to result in improved financial metrics for a year at least

In Q1 2014 Sky has reaped the rewards of its marketing strategy focused on high quality longer term subscribers with churn hitting a record low, sustaining net adds, while ARPU growth remains healthy However we perceive no change in the underlying trend: Sky’s profitability should rise smoothly towards an EBITDA margin approaching 20% in fiscal 2017 – the last year of the current Bundesliga contract In a market slow to adopt digital innovations Sky is comfortably ahead of the competition – even if trailing international peers. Its long term success will depend on its ability to build on its distinctiveness through its innovative user interface, on demand offering and original as well as exclusive content